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Thursday, May 15, 2008

Larry Summers is being blasted

Arvind Subramanian et al. blasted Larry Summers on FT for his nationalistic argument against liberal economic tradition:

Is a liberal international economic order losing intellectual support? Should developing economies be worried? If Larry Summers is the canary in the intellectual mine, his two columns in the Financial Times (April 28 and May 5) suggest that the answers to both questions are yes.

The liberal economic order of the last several decades was premised on two assumptions. First, that the proliferation of prosperity across countries was a good thing. Second, there would be winners and losers but, on balance, a majority of people in both developing and developed countries would benefit. Mr Summers now appears to be questioning both assumptions. He has not stated outright that the proliferation of prosperity is undesirable but his ­columns do suggest that globalisation creates competition for America.

I feel sympathetic to their view. American policy makers in last several decades have been promoting around the world the liberal policies as demonstrated in Washiongton Censensus: free trade, free capital flow, competition, etc. But when the developing countries begin to widely adopt these policies, economists in the U.S. as prominent as Larry Summers are saying, "It's time to rethink, we don't want our workers to be hurt in the process".  Oh well, what about the workers in developing countries?  I smell hypocrisy, and Summers is seeking his Keynesian roots.